IMF approves $3.9 billion credit line for Ukraine ahead of elections

KIEV (Reuters) - The International Monetary Fund approved a new $3.9 billion stand-by aid agreement for Ukraine on Tuesday, intended to help the country maintain stability and the trust of investors as it heads into a choppy election period.

The Finance Ministry said a first tranche of $1.4 billion should arrive by Dec. 25, and decisions on the next two tranches would come in May and November next year.

Separately, the World Bank on Tuesday announced a $750 billion loan guarantee to help Ukraine raise an estimated $1 billion in debt on international markets.

IMF aid had effectively been frozen since April 2017 due to Ukraine's stop-start efforts to implement reforms and tackle corruption as required by the IMF and other donors. The government reluctantly raised household gas tariffs in October, a potential vote-loser that was seized on by the opposition.

Ukraine holds what are likely to be tight presidential and parliamentary elections next year, while fighting a conflict in eastern Ukraine that has killed more than 10,000 people since 2014. The authorities imposed martial law in some parts of the country in November, citing the threat of a Russian invasion.

The new IMF agreement spans 14 months and replaces a $17.5 billion programme that has propped up Ukraine since it plunged into turmoil following the 2014 Crimea annexation.

"The Fund's decision stands as an important display of recognition of our undeniable progress in macroeconomic stabilization and confirmation of success in reforms," Ukrainian President Petro Poroshenko said.

The IMF said the programme would focus on four priorities, including fiscal consolidation, reducing inflation, strengthening the financial sector and pushing reforms.

The prospect of securing more IMF loans has allowed the government, which must service a rising debt burden next year, to go to the market to issue new debt, and paved the way for the European Union and other foreign donors also to disburse aid.

The World Bank approved a loan guarantee geared at pushing reforms and tackling corruption.

"Overall, the reform programme ... addresses structural bottlenecks and sends a signal to investors about Ukraine's ability to sustain reforms and address macroeconomic vulnerabilities ahead of the 2019 elections," said Satu Kahkonen, World Bank Country Director for Ukraine.